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Connecticut Hedge Fund Shuts Down as Founder Mulls Run for Governor

Conatus Capital Management’s David Stemerman, who has ties to Tiger Management, says Connecticut is “in crisis” and he’s exploring a gubernatorial bid.

  • Alicia McElhaney

Hedge fund Conatus Capital is closing its doors after nearly ten years in business so that its founder and CEO, David Stemerman, can explore a run for governor in Connecticut, a source familiar with the matter told Institutional Investor.

“Connecticut — home to my family and business — is in crisis,” Stemerman wrote in a letter to clients, according to Bloomberg, which first reported the news. “I believe that too many of our leaders do not understand the challenges we face, nor do they have a strategy for the path forward. I am deeply concerned that a small number of people in our state are thriving while many are struggling to make ends meet.” Stemerman, a Republican, said in the letter that he expects to form a committee that will prepare to launch a campaign in 2018.

[II Deep Dive: Hedge Fund Managers Can’t Always Hedge Their Politics]

The Greenwich, Connecticut firm, which now manages $1.6 billion, will wind down in December, according to Bloomberg. While its performance has been strong this year — its flagship fund has returned 18 percent, while a media fund launched in April has gained 24 percent, according to Bloomberg — its assets have been declining. According to a year-end regulatory filing, Conatus had said it was managing about $1.9 billion, down from $3 billion three years ago. The firm’s flagship fund produced an annualized return of 5.4 percent through August, Bloomberg reported.

Connecticut will elect a new governor in November 2018. The incumbent, Dannel Malloy, a Democrat, said in April that he will not seek re-election. If he runs, Stemerman will be entering a crowded race: Six Republican candidates and two Democrats are already running for governor in Connecticut.

Stemerman, who launched Conatus in 2008, had ties to Tiger Management Corp. He previously worked for Tiger Cub Stephen Mandel Jr.’s Greenwich, Connecticut–based Lone Pine Capital before going on to start his own firm.

Stemerman told clients in the letter that he plans to invest most of the money he has invested in Conatus in a new fund that will be run by Amir Mokari, the consumer sector head at Conatus, and will take a passive stake in the management firm. Mokari’s fund will launch in January and will invest in consumer, technology, media and telecommunications stocks, according to Bloomberg.

Conatus had raised $40 million for the media fund, Conatus Capital Opportunity Fund, which invested in technologies that change consumption of media. That fund was the second Conatus launched in the past two years. In 2015, the firm launched a long-only fund called the Conatus Long Opportunities Overseas Fund. It raised $160 million for that fund at its launch.